F is also a 50% owner of foreign corporation FK. Negative amounts are hovering deficits reported in column (d) of line 5a. Taxes paid or accrued with respect to distributions of PTEP by the U.S. shareholder, while not reported on the Form 5471, are subject to different rules regarding creditability and foreign currency gain or loss. Include corporate information such as the dormant corporation's annual accounting period (below the title of the form) and Items 1a, 1b, 1c, and 1d. Filers are permitted to enter both an EIN and a reference ID number. Filing requirements for persons identified in Item H. Except for members of the filer's consolidated return group, all persons identified in Item H must attach a statement to their tax returns that includes the following information. Line 3 should never have an amount entered in column (e). Enter the amount of interest expense included on line 5. Subtract line 16b from line 16a" field, "16d.Net foreign base company services income excluded under high-tax exception" field, "16e.Subtract line 16d from line 16c" field, "17.Adjusted net foreign base company oil-related income:", "17b.Expenses allocated and apportioned to line 5 under section 954(b)(5)" field, "17c.Subtract line 17b from line 17a" field, "18.Adjusted net full inclusion foreign base company income:", "18a.Enter the excess, if any, of line 12 over line 8" field, "18b.Expenses allocated and apportioned under section 954(b)(5)" field, "18c.Net full inclusion foreign base company income. However, this amount is reduced (but not below zero) by the following liabilities. A foreign corporation may accrue or pay taxes properly attributable to an income group within the general category, passive category, or section 901(j) category. CFC2 pays withholding tax of $4 on the distribution from CFC3. See Temporary Regulations section 1.921-1T(b)(3). Form 5471 Substantial Compliance Rules: IRS International Practice Unit Guidance The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. See the Instructions for Form 8938 for more information. "field, "42.Section 954(c) subpart F Foreign Base Company Services Income subtotal. This line of column (d) accounts for foreign income taxes that are suspended in the current tax year. Use the December 2020 revision of the schedule. CFC1 has a December 31 tax year end for both foreign and U.S. tax purposes. See Regulations section 1.960-1(d)(2)(ii). Enter the method of disposition (for example, sale, bequest, gift, trade). Reference ID number of foreign corporation. See the instructions for Schedule P for an example. For purposes of Category 2 and Category 3, the stock ownership threshold is met if a U.S. person owns: 10% or more of the total value of the foreign corporation's stock, or. Section 898 specified foreign corporation (SFC). Is not related (using principles of section 954(d)(3)) to the foreign-controlled corporation. Demystifying the 2021 IRS Form 5471 Schedule Q 14 Feb 2022 By Anthony Diosdi Schedule Q is used to report a controlled foreign corporation's ("CFC") income, deductions, and assets by CFC income groups. Add lines 26, 29, 32, and 35." See section 959(c). See Regulations section 1.6046-1(i) for rules on determining when U.S. persons constructively own stock of a foreign corporation and therefore are subject to the section 6046 filing requirements. Enter the CFCs tested loss QBAI amount, as defined in Regulations section 1.951A4(b)(1)(iv). Proc. See Regulations sections 1.960-1(d)(3)(ii)(A) and 1.861-20(d)(3)(v)(B). See section 482. The amounts reclassified are reported as negative numbers in columns (a) through (c) and positive numbers in column (e)(iii), as applicable. On Schedule P of the Form 5471 with respect to CFC1 filed by Corporation B, Corporation B will report on line 7, column (h), $50x of PTEP as a result of its section 951A inclusion with respect to CFC1. In Part I, Section 2, report taxes deemed paid under section 960(b)(2) with respect to distributions of PTEP from a lower-tier foreign corporation to the foreign corporation with respect to which this Schedule E (Form 5471) is being completed. Note. If the information required in a given section exceeds the space provided within that section, do not write See attached in the section and then attach all of the information on additional sheets. field, "37.Current E&P limitation computation:" field, "37b.Tested loss (enter as a positive numbersee instructions)"field, "37c.Total of line 37a and line 37b"field, "38.Enter the smaller of line 36 or line 37c" field, "39.If the amount on line 37c is less than the amount on line 36, allocate the subpart F income remaining (after having been limited) to lines 40, 41, 42, and 43 below in the manner prescribed by Regulations section 1.952-1(e). under lines 1a through 1i) or tested income under the GILTI high-tax exclusion (those amounts are reported on lines 3(1), 3(2), etc.). The corporation is required to complete both lines only if the corporation provides a platform contribution to other controlled participants and is required to make platform contribution transaction payments to other controlled participants that provide a platform contribution to other controlled cost sharing arrangement participants. For example, if there were errors in the original computation of foreign income taxes, an adjustment would be included on this line. Check the Yes box on line 17b if any controlling section 245A shareholder (as defined in Regulations section 1.245A-5(i)(2)) made an election to close the tax year of the foreign corporation such that no amount is treated as an extraordinary reduction amount or tiered extraordinary reduction amount as to any U.S. shareholder of the foreign corporation. Enter the result here and on Form 5471, Schedule I, line 1c. If a GILTI high-tax exclusion under Regulations section 1.951A-2(c)(7)(viii) is effective with respect to the CFC for the CFC inclusion year, check the box in column (xiv) that corresponds to the item(s) of income to which the exception applies. The amount reported in column (x), line 4, is the sum of the amounts reported in column (x) on lines 1(a)(1), 3(1), and 4(1), which equals $210 ($35 + $70 + $105). See section 367(d). Enter the CFCs qualified interest income, as defined in Regulations section 1.951A4(b)(2)(iii). Subtract line 21b from line 21a" field, "21d.Net related person insurance income excluded under high-tax exception" field, "21e.Subtract line 21d from line 21c" field, "22.International boycott income (section 952(a)(3))" field, "23.Illegal bribes, kickbacks, and other payments (section 952(a)(4))" field, "24.Enter the portion of line 13h that is U.S. source income effectively connected with a U.S. trade or business (section 952(b))" field, "25.Exclusions under section 959(b) that apply to line 13h amount" field, "26.Section 954(c) subpart F Foreign Personal Holding Company Income. This amount is the sum of post-2017 E&P not previously taxed, post-1986 undistributed earnings, pre-1987 E&P not previously taxed, and PTEP. See Regulations section 1.482-7(g) for more information on the methods applicable to PCTs. As a result, these U.S. shareholders may also claim a foreign tax credit for foreign income taxes deemed paid with respect to such inclusions. Form OMB ob form MEDICAL DIAGNOSTIC LABORATORIES, L.L.C. In doing so, the corporate U. S. shareholder must determine whether it meets the statutory and regulatory requirements for section 245A DRD. Section 111 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the look-through rule of section 954(c)(6). This example can also be found in the Schedule Q, Form 5471 instructions. See the instructions for lines 1 through 4. Enter the current income tax expense (benefit) on line 21a and deferred income tax expense (benefit) on line 21b. Subtract line 48 from line 47. During the tax year, did the CFC receive or accrue from a related CFC dividends, interest (including factoring income treated as income equivalent to interest for purposes of section 954(c)(1)(E)), rents, or royalties attributable or properly allocable to income of the related person which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States? Enter the amount of dividends received by the shareholder from the foreign corporation that is eligible for a deduction under section 245A. See the instructions for Schedule I-1, Line 4 and Line 6 , later, for details. Because reference ID numbers are established by or on behalf of the U.S. person filing Form 5471, there is no need to apply to the IRS to request a reference ID number or for permission to use these numbers. Enter on line 8c the CFCs total extraordinary disposition account balance with respect to all U.S shareholders of the CFC at the beginning of the CFC year and at the end of the CFC tax year. A foreign corporation may have PTEP in a PTEP group within any of the separate categories of income, with the exception of foreign branch category income. For example, with respect to line A at the top of page 1 of Schedule Q, there is a new code TOTAL that is required for Schedule Q filers in certain circumstances. For a corporate shareholder, enter the result from line 1a on Form 1120, Schedule C, line 16a; enter the result from line 1b on Form 1120, Schedule C, line 16b; and enter the remaining lines 1c through 1h, 2, and 4 on Form 1120, Schedule C, line 16c; or on the comparable line of other corporate tax returns. Column (e)(v) is PTEP described in the following three subgroups (which are aggregated into a single PTEP group). Any other current-year tax is allocated and apportioned among the section 904 categories under the rules of Regulations section 1.904-6(a) based on the portion of the foreign taxable income (as characterized under federal income tax principles) that is assigned to a particular section 904 category. If you have other foreign financial assets, you may be required to file Form 8938, Statement of Specified Foreign Financial Assets. CFC1 pays withholding tax of $4 on the distribution from CFC2. field, "30.Enter the portion of line 15e that is U.S. source income effectively connected with a U.S. trade or business (section 952(b))" field, "31.Exclusions under section 959(b) that apply to line 15e amount" field, "32.Section 954(e) subpart F Foreign Base Company Services Income. This summary filing procedure will satisfy the reporting requirements of sections 6038 and 6046. Proc. In other words, are any amounts described in section 954(c)(3)(A)(i) excluded from line 1a of Worksheet A? For example, when translating amounts to be reported on Schedule E, you must generally use the average exchange rate as defined in section 986(a). New line c has been added at the top of Schedule E to accommodate reporting of treaty countries in cases where a resource by treaty code is entered on line a. Category 3 filers must attach a statement that includes: The amount and type of any indebtedness the foreign corporation has with the related persons described in Regulations section 1.6046-1(b)(11); and. Adjustments include additional payments, refunds, and downward adjustments for accrued foreign taxes that are not paid within 2 years after the close of the tax year to which such taxes relate. It would be very rare in 2021 for a domestic corporation to have taxes deemed paid under section 902 on distributions with respect to a pre-2018 foreign corporate tax year. CFC2, in turn, wholly owns the only class of stock of CFC3, a foreign corporation. The information reported on Schedule E is relevant for U.S. shareholders making this election. If Yes, complete lines 5b and 5c. Comprehensive example Form 5471; Form 8992; Form 8993; Form 1118; Other forms and reporting requirements; Best practices; Benefits. 2019-40 provides relief for certain types of Category 5 filers. However, corporate U.S. shareholders should report on line 1e the amount from Worksheet A, line 63, less the amount, if any, reported on line 1a. Current-year tax on all other disregarded payments. In addition, certain upper-tier CFCs must maintain a hybrid deduction account with respect to each share of the stock of a lower-tier CFC that the upper-tier CFC owns directly or indirectly through a partnership, trust, or estate.